How We Paid off 100k+ in Student Debt in 2 years
Buried in debt
Having a massive amount of student debt in my 20's was not something that I was happy about or proud of. I was thrilled with the fantastic education I had received and the opportunities that came from it, but going to a private music college on the East coast comes at a price! After 4 years of school and 3 years of making the minimum payments, the total ballooned to nearly $120k (thank you crazy interest rates!!) I was embarrassed and saddened by the amount of student debt I had collected, and I felt suffocated by it.
3 years after graduating from college I was working as a music teacher at a high school in Arizona and teaching 25 piano students. I was making minimum payments towards my student loans and hadn't made paying them off a priority. I found it incredibly difficult to be positive about my situation given that the loans seemed to be growing faster than I could make any dent in them. I hated paying towards them monthly because it felt like I was throwing away money that I was working so hard to earn. It was very frustrating and at times depressing. I loved teaching piano but felt that nothing I could do would help me get out from under the massive amount of debt I had acquired. Nothing. And then I met Mike.
Inspired by Mike
Mike and I met and started dating in 2014. Soon into our dating I learned that Mike was debt free (other than a vehicle payment) and had zero student loan debt. I thought, "Whaaaaat?! How is that even possible?" I was inspired by his ability to save money and pay for his education without incurring any debt! This was a story I rarely heard from others who had recently graduated from college and I thought it was incredible! As our dating became more serious we began having more discussions about finances. Mike expressed to me that he wanted to live a debt free life and felt that being on the same page financially was important. I was embarrassed about my situation but knew that I needed to talk to him and that it was important for him to know. I came to him in tears one night and expressed my concern and sadness about my situation with student loans. He was surprised, of course, but also hopeful in our ability to quickly climb out of debt. He was simply amazing as he reassured me that we would figure it out together. True love you guys! I remember walking away that night feeling like a huge burden was lifted from my shoulders and felt hope that I hadn’t felt in years. I was so grateful that he wasn't being judgmental, but instead loving and understanding.
Things started to change immediately after our discussion about my loans. I knew that entering into marriage would mean that I needed to include him (Mike) in all money making decisions and that moving forward things would be done together. I quickly paid off a small credit card debt and started thinking about paying off my vehicle. We spend the holiday with Mike’s family in Colorado Springs, Colorado and on our drive back to Arizona from Colorado Mike wanted us to listened to Dave Ramsey's book "The Total Money Makeover." That’s when my view of debt and finances completely changed! The book was amazing and it gave me a very clear vision about how to view debt and overcome it. I was so inspired when I learned about Ramsey’s baby steps process and how to make a plan and take control of my debt/finances. Mike and I knew, before we were ever married, that we wanted to get out of debt as quickly as possible so it would allow us to have more freedom in the future. I'm grateful that we had these critical conversations and planning sessions before we were married because it gave us confidence in one another and excitement about our future together! Is it crazy to say that we were excited about getting out of debt? Well we were! We felt like a team!
Mike and I were married on March 7th, 2015. During our first few months of marriage we started talking about our dream of building online businesses and traveling together. I was thinking that it would take 15+ years to pay it off completely, but Mike put all of the numbers into a spreadsheet and calculated what our timeline would look like if we started aggressively paying off the debt. We would paid off the smallest debt first, and then the next and then next, until all were paid off. Dave Ramsey calls this the debt snowball and it’s a tactic to help build momentum. With the help of the spreadsheet to visualize our situation, we were able to set a very aggressive and demanding goal of getting out of debt in two years. Two years! Honestly, I could not believe it at first. Suddenly my fear and dread of being trapped in this debt for the next few decades began to give way to hope and optimism. The plan to get out of debt gave us hope and determination to move forward.
We knew that getting out of debt was not going to be easy, but we were incredibly determined and wanted the feeling of freedom that we knew it would bring. We also felt like 2 years was such a short amount of time when we envisioned our dreams of world travel and running our own businesses in the long run. We knew that we could do it, so for the next two years Mike and I both worked our butts off.
We started with the smallest debt and worked our way up using the debt snowball method as Dave Ramsey suggests. We had approximately $6,200 that we could send towards debt each month. In the first few months we paid off both of our MINI Coopers (yes, we both owned MINI Coopers, isn't that cute?) We then sold my MINI Cooper and purchased (with cash) a 20-year old Honda CR-V that would be perfect for our needs. It had good gas mileage, much lower maintenance costs, AC, and three working windows! Haha! Once our cars were paid off we could really start attacking the larger debts. It was the best feeling ever to watch the numbers drop each month as we attacked the total amount. We felt empowered and motivated to work even harder!
Here are a few key points that really made a difference in our journey:
Income - Your biggest tool for getting out of debt is your income. We were both fortunate to have good jobs at the time, but when we wanted to earn even more we took on more work including, teaching additional students, selling items on eBay and Amazon, and taking photography gigs on the side. More on that below.
Frugal Living - We gave ourselves $25 per month to spend on dates. Setting this goal and allowing ourselves this amount was a crucial part of living within our means and sticking to a budget. I remember hearing from a friend during this time that they budgeted $200 monthly for eating out and I couldn't even comprehend spending that much! That's how much we spent monthly on groceries!
Purchases - We rarely, if ever, went shopping during this time period. If we did purchase something, it was something that we really needed. We purchased a few clothing items as we needed them, but even this was very rare over the course of the two years. And it was in the budget.
Activities - We did a lot of hiking together! It was so perfect because other than paying for gas, hiking was free! I can honestly say that this was when my love for the outdoors grew! I loved being outside and found a new love for the beauty in Arizona. I also loved this time because it was when we would set new goals and talk about our business ideas. We did go on a few trips during these two years, but all of them included staying with family who lived in other locations so the trips were very inexpensive for us.
Dave Ramsey teaches that you need to get intense to get out of debt. He talks about dedicating all of your energy and passion towards making money to pay off the debt, which he calls getting "gazelle intense." He calls it "gazelle intense" because when a gazelle is running from a lion or cheetah he's running with all of his energy and speed so he doesn't get eaten! We need to treat debt like a gazelle treats a lion or cheetah. Dave strongly encourages his listeners to take on additional jobs to earn extra money to pay off the debts sooner, and gives several examples of what people have done to make money on the side. As a result, I took on around 55 piano students as quickly as possible (I normally had around 30-35) and worked as hard as I ever had before. There were nights when I was honestly so tired and exhausted that I thought I would hate teaching pretty soon. I would remind myself that I wouldn't be teaching that many students forever. I loved that my hard work was finally making a difference in the total debt amount and I loved watching the numbers drop! This was such a drastic change from before when I was paying minimums on student loans and not seeing any change, only watching them inflate with interest. Mike was working equally as hard in his marketing job and taking on as many extra photography gigs as he could.
There is nothing more amazing than the feeling you get when your hard work starts to pay off. As each loan was paid off, we would do a little dance, then put our energy towards paying off the next one.
How We've Changed
It is difficult to put into words how much we learned while going through the process of getting out of debt together, but I'm going to try. We've learned to appreciate experiences over things. We've learned how to communicate with one another and be on the same page. We've learned how to control our finances and budget our spending. We've learned how to be creative and think of new ways to earn money. And we've learned that we don't need a lot of stuff to make us happy.
I used to be embarrassed about letting anyone know that I had a mountain of student debt. But I know how many other people are in debt so I want to share our story to bring hope to those who are struggling. I know, because I was there. To the person who is in debt, and I know there are currently around 44 million of you in the US alone, I want you to know it's possible to get out of debt. There is hope. Mike and I hope that sharing our story will motivate others to take control of their finances and their lives, so they can create a better future. It's amazing what can be done when you really want to accomplish something big! Get motivated, set some goals, make a plan, and then crush it! We encourage anyone who wants to better their financial situation to start by reading Dave Ramsey's book "The Total Money Makeover" and subscribe to his podcast. You'll learn a lot, get motivated, and change your future. If you're getting out of debt, or recently got out of debt, let us know! We want to celebrate with you!!
Carly & Mike
(Side note: This is not a paid endorsement for Dave Ramsey's program, we just really liked the principles taught in his book. There are tons of other money management programs, so just find one that works well and stick with it. And Dave, if you're reading this, thank you!)